Before stepping into the crux of the management of your investment efficiently and effectively to get your business running, it’s helpful to look at some statistics or information regarding the subject. In the small business sector out there, some businesses are built by venture capitalists and of them dearly departed Pets.com comes to mind. However, some other businesses are built by entrepreneurs--Dell Computers and Microsoft are a couple of good examples.
Despite the dream of some entrepreneurs to meet a Venture Capitalist with deep pockets, the fact of the matter is that 99.9 percent of business owners will struggle alone, pulling themselves up by their bootstraps. And that's not necessarily a bad thing. With a little luck and a lot of pluck, bootstrapping a business can be both financially and emotionally rewarding.
There are no guarantees of success when self-financing a business, of course, but there are some guidelines that will make the game go smoothly.
Each business and each entrepreneur is unique. It's important for the business owner to understand the risk that he or she can withstand. A recent college graduate may have a high tolerance to risk because she probably doesn't have much to lose. But the equation looks a lot different for a 30-year old single parent. Throw in a couple of obligations for a mortgage and a car, and mom or dad may be reluctant to give up the day job to venture into the unknown.
Hence in this effort, your cause will become much easier, with the understanding of personal economics upfront which will make future finance decisions easier. How much capital will each partner be willing to put into a business? How much debt are they willing to assume? Set the ground rules upfront to make the tough financial decisions easier in the long run.
At the concept stage, a business is like an egg that has not yet hatched--and the incubation process can be expensive. Doing research, making phone calls and buying supplies can eat through thousands of dollars before the business is really even born. Many entrepreneurs limit their risk and expense by keeping their day job and letting the idea percolate during evenings and weekends. As seen in many stories of the entrepreneurs who took the lone path, it is evidently and clearly seen that the above mentioned fact is true and correct, since at the end of the day, you won’t be plucking my money from trees. The only money you will have will come through your own savings and other means and your earnings provided you decide to keep your day job.
Of course, not all employers will so generously support the moonlighting activities of employees. But keeping a steady income during the planning phases of a business is the best start to bootstrapping any new venture.
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